The Senate's Doing The Bullying For The IRS

Apple CEO Tim Cook (c), CFO Peter Oppenheimer (l) and Apple Head of tax operations Philip Bullock appear before a Senate homeland security and governmental affairs investigations subcommittee hearing on offshore profit shifting and the U.S. tax code, on Capitol Hill in Washington, May 21, 2013. Apple Inc came under fire on Tuesday at a Senate hearing over an investigation that alleged the U.S. high technology icon has kept billions of dollars in profits in Irish subsidiaries and paid little or no taxes to any government.

Photo: Reuters

Senators John McCain and Carl Levin have now presided over what Senator Rand Paul rightly called a “show trial.” The Senate Mensheviks have raked Apple Inc. over the coals for its practice of keeping tons and tons of money offshore.

This is money that the Mensheviks sorely need, so they can squander it on things that won’t make life better for anyone outside of K Street.

During the hearing, McCain competed with former Sen. Barack Obama in teaching us legal theories that are both radical and nonexistent, when he contended: “Apple has violated the spirit of the law, if not the letter of the law.”

Uh, senator, there is no such thing as the spirit of the law. And, by the way, you guys wrote the darn tax code, so if you are offended by it, fix it.

“I am offended by a $4 trillion government bullying,” Paul said via Twitter, “berating and badgering one of America's greatest success stories.” And: “To the U.S. Senate: I say, instead of Apple executives, you should have brought in a giant mirror if you want to see who is responsible.”

And Paul is right.

What Apple does is follow a wholly legal process whereby it keeps its duty to its constituencies -- employees, shareholders and customers -- to keep as much money for the company as possible. That’s what businesses do. They do what’s best for their constituency. And the practice in this case is called tax avoidance, which is the same thing individuals do when writing off mortgage expenses on tax returns.

This practice is not to be confused with tax evasion, which is what happens when someone lies about income on a tax return. And all the parties in the Senate are familiar with the difference. Levin, McCain, Paul -- and even Al Franken -- practice tax avoidance.

Tax avoidance is something government, as represented by guys like McCain and Levin, builds into the system when they want to reward some group. Tax evasion is something they use to punish enemies.

Corporations are getting used to the shakedown, which, as practiced in the old days by the mafia, used to be called the “protection racket.” It doesn’t matter to me that Apple keeps its money in an overseas account. What matters to me is that they have the right to defend their property from a grasping government that acts more like the mob than the mafia does.

The economic system we have now is so broken by worthless government that while the Federal Reserve mints $45 billion every month through quantitative easing to “save” the economy, corporations -- not just Apple -- carry an estimated $2 trillion in cash offshore.

At the same time, the underground economy in the U.S. has reached third-world status by expanding to another $2 trillion that isn’t officially part of the economy at all.

That’s $4 trillion in cash, or about 30 percent of our GDP off the books, and the government has the audacity to say there is something wrong with the rest of us.

While boasting some of the highest corporate tax rates in the world, U.S. politicians, with needs for higher taxes, for higher spending to keep the racket going, now intend to grandstand on a tax system that they own, wrote, manipulated and misused.

If offshore accounts provide governments around the world with accountability and competition that is sorely needed, then it’s because Levin, McCain and the U.S. Senate haven’t done their jobs.

As governments have increased the tax burden on all of us, corporations have taken advantage of their ability to move money across borders. That’s why governments hate offshore accounts so much. It keeps ’em honest and, of course, governments can’t have that. It would be unseemly in light of circumstances for the IRS to do the bullying right now.

So the Senate has been convened to bully corporations into following the spirit of the racket since right now companies feel they only have to strictly follow the law. What do they think this is?

America, that’s what.

John Ransom is finance editor at Townhall.com and the host of Ransom Notes, a nationally syndicated radio show covering the connection between politics and finance.